Trump Is Said to Abandon Contentious Border Tax on Imports

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From left, Senator Orrin G. Hatch of Utah, Abdel Fattah el-Sisi, the president of Egypt, and Senator Mitch McConnell, the majority leader from Kentucky, in Washington last month.CreditCreditAl Drago/The New York Times

WASHINGTON — The Trump administration has dropped any support for a so-called border adjustment tax on imports, according to two people who have been briefed on the matter.

The tax was intended to be the keystone of a tax reform proposal developed by Republican leaders in the House of Representatives. But it faced immense pushback from influential companies including Walmart and Toyota.

If enacted, a border adjustment tax would have effectively imposed significant levies on billions of dollars of imported goods. Retailers in particular would have been hard hit, as products ranging from tires to T-shirts, which are imported from overseas, would have suddenly cost more. Automakers and other manufacturers that rely heavily on foreign parts and supplies would have also been hit.

The border tax may be revisited later, one of these people said, but it was shelved ahead of the Wednesday release of the White House’s new tax plan. A White House spokeswoman, Lindsay Walters, did not respond to requests for comment. President Trump had always seemed ambivalent toward the border tax.

In a late February interview with Reuters, Mr. Trump said the border tax “could lead to a lot more jobs in the United States.” But the proposal received a mixed reception among his top aides; whereas chief strategist Stephen K. Bannon supported it, National Economic Council director Gary Cohn opposed it.

The change of heart comes as Mr. Trump is rushing to reveal bold policy ideas ahead of the 100th day of his presidency, which falls on Saturday. In a public announcement on Wednesday, Mr. Trump is expected to lay out a broad tax plan that includes lowering corporate taxes to 15 percent.

Dropping the border tax intensifies the political challenges of his plan for taxes. Under the plan by House Republicans, it was supposed to offset the revenue lost by other tax cuts. By just lowering corporate taxes, the budget deficit is expected to increase.

Increasing the deficit has always been a deal killer for most Republicans in Congress. However, the powerful chairman of the Senate finance committee said Tuesday he was prepared to support President Trump’s plan to cut corporate tax rates to 15 percent even if it added to the budget deficit.

Senator Orrin G. Hatch, the Republican finance committee chairman, is a critical voice on tax issues in Congress and support from him could make the difference in whether members of Congress fall in line and support the president’s proposal.

Republicans in Congress have generally been against tax cuts that add to the deficit. But many argue that now is the party’s opportunity to bring sweeping and enduring changes to the tax code.

“I’m open to getting this country moving,” Mr. Hatch said. He said that if the tax cut could stimulate the economy, then he was not as bothered by the impact it had on budget deficits. “I’m not so sure we have to go that route, but if we do, I can live with it,” Mr. Hatch said.

The comments came as Republican congressional leaders were preparing to huddle with President Trump’s economic team ahead of the administration’s rollout of its tax plan on Wednesday. Mr. Trump has told his staff that he wants to slash the corporate tax rate to 15 percent from 35 percent even if doing so increased the federal budget deficit.

Mr. Hatch, of Utah, said that he was not sure how the Congressional Budget Office would analyze the corporate tax plan that Mr. Trump is expected to propose. Republicans are planning to rely on “dynamic scoring” that accounts for economic growth created by the tax cuts to show that they would not increase the deficit.

“Whether 15 percent is the right figure or not, that’s something to be determined,” Mr. Hatch added.

Mr. Hatch had expressed skepticism on Monday about such a low corporate tax rate because, under the Senate’s reconciliation rules, changes to the tax code that reduce tax revenue expire after 10 years. Republicans are looking to use this maneuver to pass legislation with a simple majority that does not need to rely on votes from Democrats.

Democrats remain vehemently opposed to any tax legislation that offers big tax cuts for the rich. The idea of slashing the corporate tax rate to 15 percent appeared to be a nonstarter with Democrats, who have been critical of Republicans for shutting them out of discussions about tax reform.

“With respect to taxes, getting both sides together is the winning way,” said Senator Ron Wyden of Oregon, the ranking Democrat on the finance committee.

Mr. Wyden said that Mr. Trump should heed the lessons from the failed effort of Republicans to repeal the Affordable Care Act without input from Democrats. He also warned that using reconciliation to approve tax cuts would not fulfill the president’s promise to make the economy more competitive.